Bitcoin crashes after Silk Road founder arrest

Dread Pirate Roberts charged by FBI.

The value of Bitcoin has nosedived this morning on news of the arrest of "Dread Pirate Roberts" or Ross Ulbricht, founder of Silk Road.

Silk Road is an internet marketplace on which Bitcoin is extensively used. The site was shut down by US authorities overnight.

As of writing, Bitcoin fell from a high of over US$124 to US$75, recovering to US$91 on the BTC-E exchange.

Silk Road processed around 9.5 million of the approximately twelve million Bitcoins in existence, or around US$1.2 billion (A$1.28 billion) in fiat money.

While the currency dropped in value on exchanges like BTC-E and Bitstamp it remained high on Mt Gox, the biggest Bitcoin trading place.

The 29-year old Ulbricht has been charged by the Federal Bureau of Investigation (FBI) and is accused of drug trafficking, computer hacking and money laundering. He is also said to have commissioned a contract killing of a Silk Road user who threatened to expose the identities of other marketplace frequenters.

Silk Road has been operating since 2011 as an anonymous, hidden Tor service where users among other things were able to trade illegal drugs, with Bitcoin being the favoured payment method.

In July last year, Victorian Paul Leslie Howard of Brunswick West, Melbourne, was arrested for importing cocaine, MDMA, methamphetamine, LSD and other drugs via Silk Road. He pleaded guilty to some of the charges in January this year.

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